LONDON Utility SSE has been fined 10.5 million pounds for mis-selling, the largest fine the regulator has ever imposed on an energy supplier.
Ofgem said on Wednesday it had found failures relating to telephone, in-store and doorstep sales at SSE "at every stage of the process", including at management level.
"The level of fine reflects the seriousness and duration of breaches, the likely substantial harm that they have caused and the likely gain to SSE," it added.
The fine is a sign that the government and regulator are taking more aggressive action against energy companies that are found to have misled customers, adding to already high retail energy prices.
Ofgem said SSE - which provides gas, electricity, phone and broadband for households - had made misleading and inaccurate statements to customers in order to make a sale.
Examples it gave included telling customers they would save money but switching them to a more expensive contract and telling them competitor price increases were higher than they actually were.
Newly appointed Energy Minister Michael Fallon said that he had "rarely seen a worse case of consumers being misled so badly."
Although SSE's management had not wilfully breached licence conditions, Ofgem said that the board paid insufficient attention to compliance and it was not a high priority for it.
"SSE is deeply regretful that breaches occurred and apologises unreservedly to any customers who have been affected by sales activity which ran counter to the values and culture of the company," SSE said.
It said it had already taken action to remedy the issues raised, including stopping doorstep selling, bringing telesales in-house, and training and restructuring.
SSE has already been fined 1.25 million pounds for doorstep mis-selling by the courts. It has earmarked 5 million pounds to reimburse customers who felt they have been misled.
It has paid out around 400,000 pounds of this so far.
Energy Minister Fallon, who replaced John Hayes last week, said that the government's planned Energy Bill would give Ofgem the teeth it needed in future to get compensation to those directly affected.
"We're using new legislation to require suppliers to simplify their tariffs and get rid of historic poor deals," he said.
End-user lobby group Consumer Focus warned that SSE was not the only energy company that had broken rules.
"This is not a case of one bad apple or one rogue sales team. Other companies have also broken direct selling," Consumer Focus said in a statement.
"While the situation has got better...the recent history casts a long shadow and Ofgem are right to take this scale of action," the group added.
The regulator has also launched investigations into selling practices by SSE, EDF, RWE's npower and Ibedrola's Scottish Power in 2010, and by E.ON in 2012.
Last year, EDF paid out 4.5 million pounds to help vulnerable consumers after Ofgem found it had breached some licence conditions in its sales and marketing.
The investigations into npower and Scottish Power are ongoing.
(Reporting by Rosalba O'Brien and Henning Gloystein)